Our 2024 scholarship application is now open through April 15th, 2024, for high school seniors! Take a look at the requirements here.
Despite the declining use of checks in the U.S., criminals have been increasingly targeting the U.S. mail to commit check fraud. Authorities recommend that you avoid mailing checks and if you do, that you place them in a secure mail drop such as inside of a U.S. post office. Placing checks in your personal mailbox with a red flag up is not advisable, neither is placing in a blue mail collection box as they have been targeted for theft as well.
Routing Number: 261271694
Scroll Up Scroll down
Find ATM
to Your GHFCU Account

Moving into a Roth IRA: Should You Stay or Should You Go?

Aug 3, 2018

Moving into a Roth IRA may help maximize your IRA savings, but it depends on your retirement savings needs.

Moving into a Roth IRA from a Traditional IRA or SIMPLE IRA may be a great way to maximize your IRA savings. Converting is easy to do, and may have positive effects on your financial future.

The Basic Facts

A conversion is the taxable movement of Traditional or SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA assets to a Roth IRA. The financial organization administering the conversion reports the movement of assets to the IRS, while you include any pretax amounts converted in your taxable income for the year of the conversion.

Here’s how it works:

  1. The money leaves your Traditional or SIMPLE IRA. (Any amount that you withhold for income taxes is not converted and is subject to income and penalty tax.)
  2. The money is deposited into your Roth IRA as a conversion contribution (less any withholding).
  3. Include the money that left your Traditional or SIMPLE IRA in your taxable income for the year of the conversion.
  4. Enjoy tax-free income during retirement (or before).

You can convert from a Traditional IRA or a SIMPLE IRA directly or indirectly. A direct conversion occurs when the distribution from the Traditional or SIMPLE IRA is payable to the receiving financial organization for the benefit of your Roth IRA. An indirect conversion occurs when the distribution is payable to you, and within 60 days you deposit the money into a Roth IRA.

Before moving into a Roth IRA, consider the following factors:

  • Your Traditional or SIMPLE IRA balance
  • Your current IRA investments
  • Number of years until you retire
  • Your current tax rate vs. anticipated future tax rate
  • Your ability to pay tax now

If you take a distribution of your converted assets within five years, a 10 percent early distribution penalty tax generally applies unless you have a penalty tax exception.

Benefits of Moving into a Roth IRA

Roth IRAs have the potential of providing you with tax-free income now or during retirement. Because you pay tax on the amount you convert in the year you convert, you do not have to pay tax on that money again when you take it out, no matter when that is, although penalty taxes may apply. Even better, when you have a Roth IRA qualified distribution (have a Roth IRA for five years and meet one of four qualifying events), the earnings also are distributed tax-free.

Your income must be under certain limits to be eligible to make annual Roth IRA contributions. So if you are not eligible to contribute, converting may be your only way into a Roth IRA.

If your goal is to move money into a Roth IRA but you have concerns about paying the tax, it may be helpful to know that you do not have to convert your entire IRA balance in one year. You can move some of your IRA savings each year, or you may choose to wait until you are in a lower tax rate bracket to convert.

For more information about moving into a Roth IRA, contact us through our Georgia Heritage FCU website or step into one of our credit union branches in Effingham County, Chatham County, or Bryan County.

Become a Member of GHFCU

Anyone who lives, works, worships, or attends school in Chatham, Effingham, or Bryan counties in Georgia and their immediate family members may gain membership to the Credit Union.

Apply Now

Check Out Our Other Posts

Skip to content